Possibility of Market Economy Status for Mainland China Triggers Major Discussions on Future of EU Anti-dumping Measures
19 February 2016
On 2 February 2016, the European Commission presented the European Parliament and Member State trade ministers with the current state of reflection as regards the treatment of mainland China in anti-dumping investigations after December 2016.
As is well known by now, WTO rules allow countries to implement trade defences, such as anti-dumping and countervailing duties, in order to level the playing field between market players from third countries. Accordingly, the EU can impose anti-dumping duties, additional to customs tariffs, on products from third countries if an investigation demonstrates that these products enter the EU at dumped prices causing injury to the EU industry.
The EU’s anti-dumping rules are set out in Council Regulation 1225/2009 on protection against dumped imports from countries not members of the EU. Pursuant to these rules, dumping margins and duties are to be calculated by a comparison to data from a third market economy country - the analogue country - if market conditions do not prevail in the targeted country. Despite being considered a methodology which is used only exceptionally, it has so far applied to mainland China by causing its exporters to be subject to higher duties than would be the case if mainland China were given market economy status.
Against this background, it might be of interest to Hong Kong traders with business interests in the Chinese mainland to know that there are now some uncertainties about whether the EU will be able to keep its legal means to implement higher anti-dumping duties for Chinese exporters through the non-market economy (analogue country) methodology. This is due to the fact that some provisions of Section 15 of China’s Accession Protocol to the WTO, which so far constituted the legal basis for the EU to apply the said methodology, will expire on 11 December 2016.
In this respect, the possible impacts of the expiry of the mentioned provisions are now being discussed with greater emphasis at the European level. During the discussion held between the Commission, the European Parliament and the Council of Ministers on 2 February 2016, the treatment of mainland China in anti-dumping investigations was assessed from legal and economic perspectives, and special attention was given to the possible options open to the EU after the expiry of the relevant provisions.
As regards the legal aspect of the issue, in case the Commission decides to put forward a proposal in order to make its anti-dumping legislation compatible with the WTO law after the expiry of the mentioned provisions, this amendment would require its adoption under the ordinary legislative procedure by the Council (by qualified majority) and the European Parliament.
However, what seems to be more problematic for the EU is the potential economic implications of mainland China being granted market economy status, and, consequently, its exporters being subject to lesser anti-dumping duties. The following points provide some insight into what the issues mean to the EU in economic terms:
- As of end-2015, imports from mainland China were subject to 52 definitive anti-dumping measures. In terms of value, the share of imports from there to the EU, affected by anti-dumping measures, accounted for 1.38%.
- The total EU employment relating to products against which there are anti-dumping measures in force (concerning imports from all non-EU origins) accounted for 250,000 jobs in 2015, whereas more than 90% of these jobs related to measures targeting Chinese-origin products.
- An external study launched by the Commission shows that gross import prices on imported products from mainland China subject to anti-dumping measures could fall by 19% while Chinese imports could increase by between 17% and 27%. This could lead to job losses in the range of 73,300 to 188,300 in the long term, EU wide.
Thus, the first option is to grant MES to the Chinese mainland, despite the problems that this may entail. The EU is also considering two other options, namely leaving the EU legislation unchanged upon the expiry of mainland China’s transitional accession provisions, or changing the anti-dumping methodology for mainland China as part of a package that would include so-called mitigating measures. These would be measures that would mitigate any subsequent harm to the EU industry.
With the second above-mentioned option (maintaining the status quo), the main concern is the possible initiation of a legal dispute by mainland China at the WTO, since the EU could well be in breach of its WTO obligations.
The third option concerns the modification of the legislation in order to remove mainland China from the list of non-market economies while, at the same time, strengthening other provisions, especially those relating to price adjustments, to ensure that the EU’s trade defence instruments will remain effective. This option (i.e. one with mitigating measures) could be seen as an alternative means by which trade disturbances would be addressed, despite mainland China obtaining market economy status.
Please click on the EU Commission’s information note for more details on the discussion.
- Mainland China